A North Carolina state court, deciding issues of first impression under North Carolina law, has ruled that a pro rata time-on-the-risk allocation method applied to coverage claims for defense and indemnity costs in connection with numerous underlying benzene-related disease claims and asbestos claims.

The court held that the “pro rata allocation most reasonably interprets the policy language in the subject policies, requiring that sums paid by an insurer apply to those injuries occurring during that insurer’s policy period.” It added that, “[i]mplicit in this determination,” was that the policyholder was “responsible for its pro rata share of defense and indemnity costs where there has been settled, insolvent or lost policies, as well as periods where [the policyholder] was uninsured, underinsured or self-insured.”

In addition, the court ruled on a condition in three excess liability insurance policies that provided:

Loss expenses and legal expenses, including court costs and interest, if any, which may be incurred by the Insured with the consent of the Company in the adjustment or defense of claims, suits or proceedings shall be borne by the Company and the Insured in the proportion that each party’s share of loss bears to the total amount of said loss.

The court held that, pursuant to this policy language, the insurer was entitled to a declaration that it had no past, present, or future obligation to pay or reimburse defense costs under its excess policies that had been incurred without its consent.